7 Ways to Reduce Currency Conversion Fees for UK Businesses

Introduction

For UK businesses that trade internationally, receive payments from abroad, or purchase goods/services in foreign currencies, currency conversion fees can quietly erode profits. Hidden margins, unfavourable exchange rates, and repeated conversions add up. Learning how to reduce currency conversion fees isn’t only about saving a few percent – it can make a real difference to your bottom line.

In this article, we explain seven practical strategies UK businesses can use to minimise conversion costs, protect margins, and make international transactions more efficient.

1. Use Multi‑Currency Accounts

Holding funds in the original foreign currency rather than converting immediately can save money.

• Many fintech providers (Transferra, Wise, WorldFirst, etc.) offer multi‑currency business accounts so you can receive, hold, and pay out in different currencies. This cuts down on the number of conversions.
• It also means you can convert when rates are more favourable, rather than whenever you need funds.
• Paying in the same currency also minimises the cost of the transaction.

2. Compare Providers & Exchange Rates Regularly

Not all banks or payment services are equal when it comes to fees and rates.

• Banks often include hidden mark‑ups in exchange rates.
• Fintech platforms tend to have lower spreads (smaller margin over interbank rate), but they often also include hidden mark-ups. Always check the platform’s pricing on their official website. Fees and rates vary and can change.
• Compare different providers for both transfer fees and the rate you’ll get, not just advertised headline rates.

Tip: always make your first currency conversion using a small amount to calculate the real mark-up. This allows you to measure hidden fees before transferring larger sums.

3. Use Forward Contracts or Hedging Instruments

For businesses that know they have future international payments or costs, forward contracts and other hedging tools can offer predictability.

• A forward contract allows you to lock in an exchange rate for a future conversion, protecting you from adverse shifts.
• Other hedging tools or options (depending on your provider) can also help reduce risk and thereby reduce “leakage” from unexpected currency movements.

4. Consolidate Transfers & Minimise Frequency of Conversions

Rather than converting many small sums, aggregate them where possible.

• Fewer, larger conversions often benefit from better rates and fewer fixed fees.
• If you make regular payments to overseas suppliers, for example, bundling them or setting scheduled payments may reduce overhead.

5. Choose Payment Gateways / Processors with Low FX Markups

When letting third‑party gateways/processors handle payments or currency conversion, these can charge significant markups or fees.

• E‑commerce platforms (Shopify, PayPal, Stripe, etc.) often have conversion costs built in, sometimes 1‑2% or more.
• Seek gateways that offer transparent FX rates or low margins over interbank rates. Negotiate or switch to ones with better pricing.

6. Hold Funds in Foreign Currency When Practical

If you’re paid in foreign currency (for example, for sales overseas) but don’t need to convert immediately, keeping those funds in‑currency can reduce conversion fees.

• This way you avoid converting every time you receive foreign income. Rate fluctuations also may work in your favour.
• Use multi‑currency accounts (see #1) or local‑currency bank accounts in key markets to avoid forced conversion.

7. Negotiate with Your Bank or FX Provider & Use Specialist FX Companies

Especially for larger or recurring volume, negotiation can yield better deals; platforms providers often offer more competitive terms than traditional banks.

• For example, platform managers may offer lower fees or better rates, plus tools or services tailored to businesses.
• When dealing with banks, ask about: margin on the rate, fixed fees, intermediary fees, and alternative cheaper routes. Sometimes switching providers can make a big difference.

Bonus Tip: Monitor Exchange Rates & Use Timing Smartly

While this is more about strategy than structure, timing conversions when rates are favourable can save you money – though it carries some risk.

• Use tools or services that allow setting target rates (e.g. rate alerts, automated conversions) so when the market hits a good rate, conversion happens.
• Be aware of market events (economic releases, central bank announcements etc.) that may move currency rates. But don’t try to time everything – combine this with other strategies above.

Conclusion

Reducing fees on international payments is critical for growing, globally-minded UK businesses. By learning how to reduce currency conversion fees and using multi-currency accounts, comparing providers, and testing conversion costs before committing, you can retain more of your hard-earned revenue.

Start applying even two or three of these methods, and you’ll notice immediate and long-term savings.

If you put even a few of the above tips into practice, you’ll likely see better margins, more predictable costs, and more control over your international finances.

Frequently Asked Questions (FAQs)

Q: What is the “interbank rate” and why does it matter?
A: The interbank (mid‑market) rate is the rate at which large banks trade currencies with each other. Real‑world providers usually add a margin (i.e. a mark‑up) over that rate. The smaller the margin, the closer you are paying to “fair” price.

Q: Are high‑street banks always more expensive than fintechs?
A: Not always, but often. Traditional banks tend to have higher overheads and add larger margins or fixed fees. Fintechs platforms usually offer more transparency and lower fees, but be sure to compare.

Q: How do I know if I’m paying too much already?
A: Review your past international transactions. Look at (a) the difference between rate you got vs current interbank rate at the time, (b) any hidden or additional fees (transfer, receiving banks, intermediary, etc.), (c) frequency of conversions. If these are high, there’s likely room for savings.

Q: What’s the fastest way to reduce fees?
“Open a multi-currency account, compare exchange rate providers, and test small transfers to uncover hidden markups – that’s the quickest start if you want to know how to reduce currency conversion fees.”